Journalists, unlike the financial industry, have benefited a great deal from MiFID II. Markets, regulation and financial trade reporters have all generated a wealth of copy from the tortuous passage of the forthcoming directives. But now that implementation is less than two months away, thoughtful journalists covering individual companies and their traded securities may well be wondering about the impact on their own work.
The pre-MiFID II world offers plentiful source material, at every level of sophistication, for reporters covering companies and their debt and equity instruments. Sell-side research, both from the specialist corporate broking houses and the large integrated banks, is freely available and journalists make use of it both as source material and for story ideas. Analysts are often staple contacts for reporters focusing on individual companies or entire sectors. Even independent research houses are willing to share some of their ideas with the press, to showcase their wares.
MiFID II is likely to change that, meaningfully.
On the sell-side, the universe of published research is likely to diminish substantially, as research costs are unbundled from other forms of income, notably sales and trading revenue. They will not be able to simply pass these on in aggregate to fund managers and institutional investors once clear light of day – for the first time – is thrown on the research business.
With the demise of that cross-subsidy, research will need to become a profit centre in its own right to comply with the provisions of MiFID II, and if something isn’t going to make money, it will neither be written nor published. Even work that does get published is likely to remain behind paywalls and out of the hands of reporters.
The buy-side, especially the more well-resourced institutions, will pick up some of that slack, but there will be few incentives for fund managers to share that costly proprietary information with reporters and then lose the competitive advantage it confers.
Even the independent houses, many of whom will find new leverage with companies to subsidise the best research coverage, are likely to see their place in the pecking order improved, making them less reliant on journalists.
For reporters who take a broader view, without relying on access to individual research notes, the post-MiFID II world will still present a challenge. The contraction of the coverage universe outlined above will make broad consensus views harder to form. Sources like Bloomberg and Reuters, which currently provide a handy snapshot ‘consensus’ view of how analysts perceive a stock, are likely to find it much harder to perform their role as market bellwethers.
This will present both opportunities and challenges for in-house corporate communicators, which will require forethought and planning to navigate effectively.
In the absence of freely available research, journalists will become more reliant on negotiated access to information that would otherwise remain behind a paywall. Corporate PRs’ Investor Relations colleagues will have an enhanced role in both ensuring that coverage is written and in its dissemination, making them an even more pivotal partner to the PR function than they are currently. If not already integrated, the case for a more ‘joined up’ approach between in-house PR and IR teams will become all the more obvious under MiFID II.
As companies themselves gain more control over the publicly available information on them and the performance of the securities they have issued, they will have a chance to bring journalists much closer to them. While reporters frequently only contact firms with “right of reply” requests, having written their stories from research in the public domain, MiFID II is likely to cause a shift in the dynamic that could result in much closer connections between businesses and the people who write about them.
Of course, it will not always be appropriate to share research, and PR professionals will still have to make the usual choice between background briefings and on-the-record information-sharing. But careful thought and internal planning now, in the final couple of months before MiFID II’s implementation, should help to ensure that corporate PRs can maintain their modi operandi when the supply of freely available research begins to slow next year.